Expanded SST to aid B40 and M40 groups - Treasury sec-gen

New Straits Times

18 hours ago

KUALA LUMPUR: Treasury secretary-general Datuk Johan Mahmood Merican said 5.4 million Malaysians in lower- and middle-income households stand to benefit from the expanded sales and service tax (SST) regime, set to take effect on July 1.
He said the anticipated boost in revenue will enable the government to scale up financial assistance for B40 and M40 income groups, such as the monthly Sumbangan Asas Rahmah (Sara).
The number of Sara recipients has increased significantly to 5.4 million since April, compared to just 700,000 previously.
"As the prime minister highlighted in his 2025 Budget speech, increasing government revenue is essential to enhancing services for the rakyat.
"This expansion of the SST is driven by three primary objectives: improvement of services to the people, responsible fiscal management and making fiscal space to face global uncertainty," said Johan.
He also said the government has implemented various measures to shield the B40 and M40 groups from the adverse effects of the SST adjustments.
Crucially, the Finance Ministry has ensured the SST expansion targets only non-essential goods and services, so that daily expenditure for B40 and M40 families remains largely unaffected.
This fiscal move forms part of the Madani economic reform agenda, which aims to reduce the fiscal deficit from 5.5 per cent in 2020 to a targeted 3.8 per cent in 2025.
Putrajaya is also directing additional spending towards healthcare, allocating over RM1 billion for permanent contracts and RM400 million to upgrade dilapidated clinics, as well as investing further in schools and rural infrastructure.
"The ministry focuses on daily necessities — there is also an element of evaluation," Johan told Free Malaysia Today in a recent interview.
Essential items like unprocessed foods (chicken, meat, local vegetables, rice), basic processed foods (flour, sardines, sugar, bread, milk, palm cooking oil), medicines and books will remain exempt from SST (0 per cent).
Elaborating on the classification, Johan said the government distinguishes between daily necessities and optional goods.
While staple items like sardines, tongkol and kembung remain at 0 per cent SST, premium items such as imported fruits and seafood like salmon, cod and king crab will be subject to a 5 per cent SST.
"Optional goods with alternatives are subject to 5 per cent SST, such as electrical appliances and processed foods like jam," he added.
Local fruits are not subject to the sales tax, with only imported fruits incurring the 5 per cent rate.
Johan expressed hope that the exemptions provided would encourage the consumption of local produce.
The Domestic Trade and Cost of Living Ministry also actively monitors prices to curb profiteering, with increased enforcement and provision of affordable alternatives through Jualan Rahmah and Agro Madani.
Addressing concerns of potential inflation from profiteering, Johan said the ministry would intensify price monitoring at retail outlets and supermarkets.
The government has clarified that the current SST adjustment will not involve any increase to the SST rates — currently set at 0, 5 and 10 per cent — but will broaden the scope of the tax, shifting certain optional goods from 0 to 5 per cent.
Unlike the Goods and Services Tax (GST), the SST remains more targeted, minimising the burden on lower-income groups. For instance, service tax on work and education is primarily levied on non-citizens, with the tax imposed on private school fees exceeding a set threshold.
Johan described the SST expansion as part of a broader, long-term fiscal reform plan under the Madani economic framework aimed at restructuring the national economy and improving the welfare of Malaysians.